April 21, 2020

Global Deal Activity: Yeah, It’s as Bad as You Thought

R.W. Baird just issued its Global M&A Report covering last month’s deal activity – and the report says that it was as bad as you thought it was. Here’s an excerpt:

The COVID-19 situation has shifted most key variables for M&A activity into negative territory, with this dynamic becoming apparent in the M&A data for March. The global deal count in March fell 20.5% to 2,019, which was below the LTM mean of 2,489. Dollar volume decreased 45.7% to $162.2 billion, trailing the LTM average of $230.7 billion. In the middle market, the number of transactions was down 21.1%, and dollar value declined 32.8%.

Global M&A dollar metrics tracked under prior-year levels in Q1 2020. Announced dollar volume contracted 38.2% to $513.1 billion, while the number of deals was down 7.5% to 6,740. In the middle market, the year-to-date transaction total declined 7.0%, and dollar value was 15.8% under the prior-year level.

Public leveraged debt markets were effectively shut during most of March, and although there were some deals in early April, the report says that direct lenders with committed funds are likely to be the primary source of leveraged funding until the Covid-19 situation sorts itself out.

The good news is that it looks like those folks are still lending.  The report says that the number of deals completed in March “approached the deal flow of preceding months, albeit at higher prices and lower leverage,” and that many private credit providers now have more bandwidth to assess new deals for borrowers with manageable risk profiles.

John Jenkins